Credit Card Stocks Are Maxing Out

Most sectors and subsectors of the U.S. stock market have had superb runs in 2013, so it’s no surprise to see the credit card companies in the mix.

However, with both MasterCard (MA[1]) and Discover Financial Services (DFS[2]) rallying more than 10% month-to-date — and by so doing so, reaching new year-to-date highs — I must question how much longer their rally can keep going at this rate.

For a little perspective, and to bring in the visual on what I just discussed above, on the below chart I drew the stock prices of MasterCard, Discover, American Express (AXP[3]), and Visa (V[4]). In all cases, we see stocks moving from the bottom left to the upper right. Simple enough.

At the same time, the credit card stocks also continue to respect their major uptrend lines. See the below chart of MasterCard stock, for example, which for the most part since June 2012 has traded in a defined uptrending channel, and with the September rally, has once again reached the upper end of said channel.

From this point of view, MA has likely reached a resistance level for the near-term, while at the same time remaining well-positioned for further highs in coming months.

All of the credit card stocks have not only had good runs in September so far, but had up-days on anywhere from seven to nine out of the 10 trading days so far this month. While this streak can certainly continue, the odds of a breather here — at least for a few sessions — are increasing by the day.

Even Discover Financial Services — which on Monday screamed to a new year-to-date high, pushing past its summer 2013 resistance line — is now getting closer to the upper end of its trading channel.

To be clear, it’s no time to short the credit card stocks, but chasing them higher after seven to nine up-days in September so far is no great strategy either.

Wait for some near-term consolidation before buying the credit card stocks again.

Serge Berger is the head trader and investment strategist for The Steady Trader[5]. Sign up for hisfree Weekly Market Outlook Video here[6]. As of this writing, he did not hold a position in any of the aforementioned securities.